Azerbaijan Strategic Performance Unit

1
Azerbaijan Strategic Performance Unit

• September 2009
• Baku

2
Azerbaijan country context

• Area 86,600 km2
• Population 8.7 million (end 2008)

• Strengths
• Promising future for the oil and gas sector
• Strong adherence to PSAs
• State Oil Fund accumulating oil revenues

• Oil history famous Azerbaijan oil firsts
• First oil well in the world was drilled (not dug
  by hand) in 1848 in Baku in Bibi Heybat oil field
• In 1900 Azerbaijan produced more than 50 of
  worlds oil 11.4 million tons
• In 1897-1907 the 1st largest oil pipeline in the
  world was built from Baku to Batumi 883 km x
  200mm
• About 80 of oil production during World War II
  in the former USSR was made in Baku (peak
  production 23.5 million tons in 1941)
• First offshore oil production in the world
  started in Azerbaijan (1924 Bibi Heybat beach,
  1947 Oil Rocks - in the open sea)

3
BP Azerbaijan Interests
Russia
Kazakhstan
Black Sea
Georgia
WREP Pipeline Oil
Tbilisi
Caspian Sea
Turkmenistan
Supsa
ACG Oil Production Development
Sangachal Terminal
BTC Pipeline Oil
South Caucasus Pipeline Gas
Baku
Azerbaijan
Shah Deniz Gas Production Development
Turkey
Erzurum
Araz-Alov-Sharg Exploration
Stage 2
Stage 1
Ceyhan
Iran
Med. Sea
Syria
Iraq
4
BP Operated Interests in Azerbaijan
ACG
Alov
Shah Deniz
Itochu
Hess
BP
3.9
2.7
Devon Energy
15
5.6
TPAO
BP
SOCAR
6.7
34.1
40
ExxonMobil
StatoilHydro
8.0
15
StatoilHydro
8.6
Chevron
ExxonMobil
SOCAR
EnCana
15
10.3
Inpex
TPAO
10.0
5
10.0
10
SCPC (technical operator)
BTC
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Project Schedule
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
ACG PSA Early Oil Project Central Azeri
CWP West East Azeri ACG Phase 3 BTC Shah Deniz
PSA Shah Deniz St1 Shah Deniz St2 Chirag Oil
Project
First Oil

First Oil
CWP Start-up

First Oil WA
First Oil EA
First Oil

Ceyhan Lifting
First Gas to Turkey

Appraise
Select
Define
Execute
PSA signed / Sanction
CVP gate
Operation
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ACG

• Potential ultimate recovery gt 5bn bbl
  gross
• Peak production 1 mmbd gross
• Total capital cost gt20bn gross
• Latest 2009 production forecast 819 mbd
• Project start-up dates
• EOP Nov 1997
• Central Azeri Feb 2005
• West Azeri Dec 2005
• Gas injection May 2006
• East Azeri Oct 2006
• Phase 3 (DWG)
  Apr 2008
• COP
  3Q2013

BTC, WREP, Rail
Sangachal Terminal
Central Azeri Phase 1
East Azeri Phase 2
West Azeri Phase 2
Deepwater Gunashli Phase 3
Chirag EOP
Chirag COP
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Shah Deniz

• Recoverable volumes (total) 180 bcm of gas
  600 mmbbls of condensate
• Stage 1 plateau gas production 8.6 bcma
• Total capital cost gt4bn
• Latest 2009 gas production forecast 680
  mmscfd
• Latest 2009 condensate production forecast
  41 mbd
• Project start-up dates
• TPG 500 platform installed
  Apr 2006
• First gas Dec 2006
• First gas to Georgia Jan 2007
• First gas to Turkey Jul 2007

BOTAS
Stage 1 Decline Sales
BTC SPA
Georgia SPA
Georgia SPA
Azerbaijan SPA
Azerbaijan SPA
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BTC and SCP
South Caucasus Pipeline (SCP) Full capacity 20
bcma Length 690 km Diameter 42 Gross
Capex 1.1bn First gas Jan 2007
Baku-Tbilisi-Ceyhan Pipeline (BTC) Full capacity
(March, 2009) 1.2 mmbd Length 1768
km Diameter 46/42/34 Gross Capex 3.9bn First
tanker departed June 2006
BLACK SEA
CASPIAN SEA
GEORGIA
GEORGIA
BLACK SEA
TBILISI
TBILISI
CASPIAN SEA
AZERBAIJAN
AZERBAIJAN
BAKU
BAKU
TURKEY
TURKEY
Sangachal
Sangachal
Erzurum
Erzurum
CEYHAN
CEYHAN
MEDITERRANEAN SEA
MEDITERRANEAN SEA
Azerbaijan
Georgia
Turkey
3000m 2000m 1000m Sea Level

• 1600 1500 1400 1300 1200 1100 1000 900 800 700 60
  0 500 400 300 200 100 0
• BTC Pipeline Route Profile (Distance in km)

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Sangachal Terminal - history
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Sangachal Terminal present

• One of the largest terminals in the world
• Area 542 hectares
• Processing capacity
• oil 1.2 million bpd
• gas 1.25 bcf/day
• Storage capacity 3 million barrels
• Hosts the largest energy museum in the region
  Caspian Energy Centre

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ST - a strategic hub for the Caspian
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BP Azerbaijan Overview
Baseline 2004
The Future
Present 2009
BTC, SCP, WREP, Rail
BTC, SCP WREP, Rail
NREP, WREP
Sangachal
Sangachal
Sangachal
Chirag
West Azeri
ACG Phase 3
Central Azeri/CWP
Chirag
East Azeri
West Azeri
COP
Central Azeri/CWP
East Azeri
SD Stage 1
ACG Phase 3
Chirag
Shah Deniz Stage 1
SD Stage 2
GROWTH Capital Spend 2004 12m/ day
GROWTH Capital Spend 2009 6m/day
GROWTH Capital Spend Future 19m/day

• People 3000 BP staff
• agency
• Infrastructure
• 2 export pipelines
• Sangachal EOP Terminal
• Production
• 130 mbd

• 4000 BP staff agency
• 3 export pipelines and rail
• Expanded Sangachal terminal
• Over 900 mboed

• gt2000 BP staff
• 3 export pipelines and rail
• One of the biggest terminals in the world
• Oil and condensate peak 1 mmbd
• Gas peak gt 2.3 bscf/day

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ACG
Chirag
Sangachal Terminal
Central Azeri CWP
DWG DUQ and PCWU sail away and installation
DWG, DUQ PCWU
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Shah Deniz
TPG500
SCP
Progress on SDX-05
Sangachal Terminal First Gas
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BTC
RoW Reinstatement
Georgia Pump Station
The official inauguration of BTC
The British Hawthorn tanker with first BTC cargo
departing Ceyhan on 04 June 2006
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BP a responsible operator

• Security and human rights
• Environmental responsibility
• Professional development of local staff
• Our role in society
• Revenue impact and management
• External stakeholder engagement

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Security human rights

• Working with communities
• Interacting with public security
• Grievance resolution
• External monitoring

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Environmental responsibility
After
During Construction
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Professional development of local staff
83 of BPs professionals in the Caspian are
nationals Azerbaijan Strategic Performance Unit
has been led by national President since
September 2009

• Caspian Technical Training Centre (CTTC)
• Educational assistance
• Special entrance and development program
• Career planning

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Our role in society

• Community Investment Programme
• Environmental Investment Programme
• Educational initiatives
• Revenue transparency
• Local content
• Regional Development Initiative

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Revenue impact and management
Capacity building
Procurement and Supply Chain Management

• In 2008 local, operations-only, single-year
  spend in Azerbaijan
• was over 1 billion
• Focus on localizing specific sectors through
  PSCM
• Formation of the Local Content Group

• Macro-econometric model and capacity building to
  SOFAZ (2006-2007)
• Macroeconomic advisory and institution reform
  assistance to MoED (2008-2010)
• Business environment enabling project with IFC
  (2009-2010)

Communication and outreach
Local content strategy

• Enterprise Center (2002-2009)
• Web portal
• Best of Business Award
• Link between SME and oil companies

• Maximize local content by
• increasing the number of companies participating
  in contracts
• raising the value of locally-awarded contracts

Reporting

• EITI reporting continues
• Azerbaijan Sustainability Report
  www.bp.com/caspian/2008sr

• Sustainable Development Initiative
• Provision of transparent sources of finance
• Provision of hands on training and development
  for local companies (EDTP)

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External stakeholder engagement

• Governments
• NGOs
• Communities
• Media
• Other interested parties

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Azerbaijan Strategic Performance Unit